FBR Heads to the Sidelines on FuelCell Energy Inc (FCEL); Here’s Why

Yesterday, FuelCell Energy Inc (NASDAQ:FCEL) indicated that it did not garner approval to move into contract negotiations for the Beacon Falls, Connecticut 63.3 MW project. Additionally, the energy company’s management team expressed no explanation was provided to clarify why the project was not selected.

FBR analyst Carter Driscoll understands that the “loss of Beacon Falls hurts a lot” and in reaction downgrades from an Outperform to a Market Perform rating on shares of FCEL while cutting the price target from $9 to $5.50.

Without presently available rationale for why FCEL’s project did not win the green light, why is it that Beacon Falls ultimately failed to make the cut? The analyst believes, “There were several positive characteristics that appeared to position the project for success. We suspect, but have not yet been able to verify, that economics may have played a part as the award winners for the tri-state clean energy RFPs were wind and solar projects, which typically have a lower generation cost.”

“Regardless, the loss of the project negatively impacts our FY17 revenue and margin forecasts and we have lowered estimates as a result. While we believe there are still some near-term catalysts, we are less confident in the timing of potential awards and believe the stock is in a ‘show-me’ mode. We are stepping to the sidelines, removing FCEL as our Alpha Generator pick, cutting our price target to $5.50 from $9, and lowering our rating to Market Perform from Outperform,” Driscoll concludes.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Carter Driscoll is ranked #4,039 out of 4,197 analysts. Driscoll has a 19% success rate and faces a loss of 18.1% in his annual returns. When recommending FCEL, Driscoll loses 9.9% in average profits on the stock.

TipRanks analytics demonstrate FCEL as a Hold. Based on 2 analysts polled in the last 3 months, 100% rate a Buy on FCEL. The 12-month price target stands at $4.00, marking a nearly 7% upside from current levels.